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Bad loans on real estate continue to push harder on the nation's banks.

At the end of the first quarter, six out of every 10 banks in the U.S. were less well prepared to withstand their potential loan losses than they had been at the end of 2008, according to a new analysis by msnbc.com and the Investigative Reporting Workshop at American University in Washington. Overall, bad loans rose another 22 percent in the quarter as the recession continued.

The analysis relies on information reported through March 31 to the Federal Deposit Insurance Corp., calculating each bank's troubled asset ratio, which compares troubled loans against the bank's capital and loan loss reserves. A similar ratio, known as a Texas Ratio, is commonly used by bank analysts as a snapshot of a bank's financial health, though it can't capture all the nuances of a bank's condition.

Although much attention has been focused on surprising profits at U.S. banks in the first quarter of 2009, under the surface lurks an industry still suffering from the recession. If you set aside the 10 largest banks, the rest of the industry lost money in the quarter, primarily because of very large losses at a few banks.

While the 10 largest banks reported $10.2 billion in earnings for the quarter, the remaining 8,245 banks together lost $2.6 billion, according to the analysis.

One in five banks lost money in the quarter, and several lost big, weighing down the rest.

Four large banks account for more than $5 billion in losses. Huntington National Bank of Columbus, Ohio, lost $2.46 billion. FIA Card Services of Wilmington, Del., lost $1.47 billion. SunTrust Bank of Atlanta lost $783 million. Sovereign Bank of Wyomissing, Pa., lost $764 million.

What's the trend in bad loans?
Continuing the trend from 2008, there was a significant deterioration in the first quarter in the ability of banks to withstand potential losses from troubled loans.

If a troubled asset ratio of 100 is a sign of severe stress, then an additional 93 banks moved past that level in the quarter, for a total of 237. Still, that's only 3 percent of the nation's banks.

Some analysts have said that any ratio over 20 percent is an early warning sign. An additional 421 banks moved past that level, for a total of 2,692. That's 33 percent of the nation's banks.

While the troubled asset ratio is not a predictor of bank failure, 29 of the 37 banks that have failed so far this year had ratios of greater than 100 percent, reported Wendell Cochran, senior editor of the reporting project at American University.

The reports in most cases do not include the billions in federal money injected onto the balance sheets of bank holding companies in the form of so-called TARP funds. Although the public was told by members of Congress that one of the purposes of the TARP program was to increase lending, in nearly all cases that money has stayed with the bank holding companies as a cushion against hard times, and has not been passed on to their individual banks where it might be used to make loans. In fact, the total of loans outstanding declined again in the quarter as the recession continued.

The American Bankers Association opposes the sharing of ratios like these with the public, and said in a statement that the vast majority of the nation's banks "has been and continues to be well capitalized." (For a discussion of bankers' views on such ratios,
see msnbc.com's previous report
for data from the fourth quarter of 2008.)

The total of troubled assets rose to $285.2 billion at the end of the quarter. At the end of 2008, for the same banks, it was $233.7 billion. That's an increase of 22 percent in the quarter. At the end of the year 2007, it was $94 billion.

Out of 8,228 banks for which we have data for the latest two quarters, 4,918 showed a worsening ratio, or 59.8 percent. Only 2,776 banks, or 33.7 percent, showed improvement during the first quarter. And 534 banks, or 6.5 percent, kept the same ratio.

More bad loans at big banks
Most of the largest banks showed increasing burdens of bad loans. Out of the largest 100 banks, 86 showed declining ability to withstand losses. Only 11 improved. One maintained the same ratio. (Two did not report data that could be compared.)

The median troubled asset ratio for the 100 largest banks was 19.6 at the end of the quarter, up again from 16.7 at year end 2008, and 8.6 at year-end 2007.

The largest bank with a ratio over 100 was BankUnited FSB of Coral Gables, Fla., which was closed by its regulator on May 21. The bank ended the first quarter with a troubled asset ratio at a startling 3,750. It reported troubled assets of $1.6 billion, and capital and loan loss reserves of only $44 million. It had been the 96th-largest bank in the U.S. at the end of the quarter, by assets.

The highest ratio of an existing bank in the largest 100 banks is at AmTrust Bank of Cleveland, which showed further deterioration. The ratio had been 130 at year end, or 30 percent more troubled loans than capital and reserves. It weakened to a ratio of 174 at the end of the first quarter. In a previous statement, AmTrust said it was attempting to raise more capital. Though based in Ohio, the bank suffered from construction loans it made in South Florida.

Limitations of the ratio
The ratio was devised by Cochran, senior editor of the Investigative Reporting Workshop. A former business reporter, Cochran may have been the first journalist to create this measure of bank health. He did that while covering banking for the Des Moines Register in the early 1980s. Cochran now teaches journalism at American University.

Others do similar calculations. The most widely used is the so-called Texas Ratio, created in the 1980s by a banking consultant.

The troubled asset ratio may not accurately reflect a bank's standing today. As with any annual or quarterly report, there's a lag time before the numbers are reported, and the figures don't reflect changes since March 31.

The ratio does not include the value of non-loan assets that have caused so much trouble in the past year, particularly for some larger banks that moved away from traditional commercial banking. The ratio does not reflect mortgage-backed securities, collateralized debt obligations, etc. In this way, the ratio may underestimate the real depth of problems at some banks.

And no ratio can get at the detailed information — such as the individual loan files, quality of management, and potential for raising other capital — that a regulator will use to evaluate a bank's safety and soundness.

Profits still 'a mixed bag'While the largest banks as a group showed profits in the first quarter, much of that came from securities trades, not from banking, the FDIC said in its quarterly commentary.

Setting aside the 10 largest banks, the loss for the quarter was $2.6 billion. For the same banks for all of 2008, the profit was just $229 million, compared with a profit of $56.6 billion back in 2007.

Overall, 22 percent of banks lost money in the quarter, essentially unchanged from 23 percent in 2008. In 2007, only 11 percent were unprofitable.

"I think the next quarter is still going to be a mixed bag," said Karen Thomas, vice president of the Independent Community Bankers of America. "Most banks are well capitalized. Not all of them are going to be able to work through their challenges, but the vast majority of them will."

Depositors are protected
Even when a bank does fail, no depositor has lost a dime in insured deposits since the FDIC was created in 1934.

The protection has its limits. The basic limit had been $100,000 per depositor per bank, but was temporarily increased in October to $250,000. The $250,000 limit was recently extended through Dec. 31, 2013. The FDIC has more detailed information and a calculator to help you determine your level of protection.

If your deposits are under the FDIC limits, you're protected even if your bank should fail. If your deposits exceed those limits, the best protection is to move deposits now into smaller accounts at more than one FDIC-insured bank.